Ordering Paragraph 7: Net to Gross Ratio (NTGR)

Ordering Paragraph 7 provides:

"Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), San Diego Gas & Electric Company (SDG&E), and Southern California Gas Company (SoCalGas) shall jointly collect data on free-riders, review field studies and gathered information, including the final Xenergy Study on the nonresidential SPC program scheduled to be completed this year, and jointly with interested stakeholders, after conducting a public process, develop net-to-gross ratios (NTG) ratios to be used for Program Year (PY) 2001 programs. If there is credible evaluative measurement of the NTG ratio of individual programs, the utilities shall use that data for PY 2001."

The parties represent that they reached agreement with respect many of the net to gross ratios (NTGRs) to be used in calculating the cost-effectiveness of PY 2001 programs. They recommend specific NTGRs to be used for current program elements and end-uses that are similar to programs previously offered and studied, based upon historical NTGRs. For programs and end-uses that are not sufficiently similar to prior programs, the parties recommend that we adopt a default NTGR of .80, which is based on the average of the historic NTGRs. The recommended NTGRs are set forth in Appendix C1 to the Workshop Report. With respect to program elements that are not set forth on the tables in Appendix C1, the parties agree that the default NTGR of .80 should be used.

The parties also agree that NTGRs should be used at the program element and end-use levels and that addressing the potential need for evaluating the NTGRs or other cost-effectiveness inputs of other program elements should be a priority for ongoing CALMAC activities.

The parties' recommendations appear reasonable and should be used in the cost-effectiveness calculations for PY 2001 programs, with the modifications discussed below.

The California Energy Commission (CEC) disagrees with a number of specific proposed NTGRs in the residential, non-residential, and new construction areas.³

In the residential sector, the CEC disagrees with the 1.3 NTGR PG&E proposes for the early appliance retirement program, arguing that the PY 2001 program design is not likely to be similar to the program studied in 1996 to justify use of the historic 1.3 NTGR. The CEC recommends that the default ratio of 0.80 be used for this element if PG&E goes forward with an early retirement program.

The CEC's argument has some merit and PG&E should revisit this issue when its PY 2001 program is finalized. If the proposed refrigerator retirement program is sufficiently different from the 1996 program, e.g., if it includes recycling in addition to retirement, PG&E should revise the NTGR accordingly. If PG&E determines that the current program is sufficiently similar to the 1996 program, it should provide appropriate justification with the PY 2001 application.

In the non-residential sector, the CEC objects to values proposed for selected elements in the small nonresidential comprehensive retrofit sectors.⁴

The CEC disagrees with PG&E's use of a .96 NTGR for the NR small/medium C/I standard incentives, contending that the historical NTGR used discrete choice analysis for customers targeted in pre-1998 programs which are different than the target market for the new program. Again, the CEC argument has some merit. PG&E should revisit this issue and, if the target markets of the two programs are sufficiently different, revise the NTGR accordingly. If it does not adjust its NTGR, it should justify the NTGR used in its PY 2001 Application.

The CEC disagrees with Edison's use of a .94 NTGR for the same program and recommends that a range of .8 (lighting) to 1.0 (process), which are the end-use NTGRs set forth in the report, be used. There is no rationale given for this recommendation so there is an insufficient basis upon which to make a ruling. Edison should work with the CEC to resolve this issue, if possible.

The CEC disagrees with SDG&E's use of a 1.11 NTGR for financial incentives for small and medium customers because the study cited found value for all commercial customers and not just the small customer target. The CEC recommends that the default of .8 be used until better evidence is available. There is some merit to the CEC's argument. SDG&E should revisit this issue, and if there is sufficient dissimilarity between the customers targeted in the historical program and those targeted in the proposed PY 2001 program, revise its NTGR accordingly. If it does not revise its NTGR, it should justify its selected NTGR in its PY 2001 Application.

The CEC disagrees with SoCalGas' use of a 1.0 NTGR for Advanced Water heating systems, comprehensive space conditioning, and integrated food services retrofit because not enough information has been presented about the program designs to justify basing the NTGR for those programs on the studies of the 1995-1997 commercial rebate. The CEC recommends that the default of .8 NTGR be used. There is insufficient information upon which to make a ruling on this item. SDG&E should provide the CEC with additional information about the program and then revisit the assigned NTGR. If SoCalGas does not revise its NTGR, it should justify the use of its chosen NTGR in its PY 2001 Application.

In the New Construction area, the CEC recommends that Edison use the .75 (instead of .62) NTGR for the Savings by Design program to be consistent with the .75 NTGR used by PG&E and SDG&E. We agree that the utilities should use the same NTGRs for all statewide programs, as reflected on Table 6, discussed further below.

With respect to statewide programs, the CEC objects to the 1.0 NTGR for the express efficiency program because common sense suggests that at least some of these customers will be freeriders. The CEC notes that it has not had enough time to review the supporting studies. It recommends that the default ratio of .80 NTGR be used. There is an insufficient basis upon which to issue a ruling on this issue at this time. The CEC should work with the utilities to resolve this issue.

The utilities should also make a few modifications to the recommended NTGRs prior to using them in the cost-effectiveness analysis for PY 2001 programs:

1. All utilities should use the NTGRs from Table 6 for statewide programs. In several instances, the values stated on Table 4 are different from those stated on Table 6.

2. The utilities should use the same names for all statewide programs. For example, the statewide Express Efficiency Program should be called the Express Efficiency Program. Table 4 shows only that PG&E has an Express Efficiency Program, whereas all four utilities had Express Efficiency Programs in PY 2000. This is particularly appropriate since the utilities have been directed to standardize this program for PY 2001.

3. All NTGRs should be reevaluated after the programs are finalized to ensure that the NTGRs are appropriate given new program designs.

The utilities should append updated tables to the PY 2001 Applications. Table 4 should reflect:

1. Updated program values, including new programs and reevaluated programs, standardized values and names for statewide programs, and the modifications directed above;

2. A key to terms and values, including a more comprehensive description of the programs valued; and

3. Grouping by similar programs to the extent possible, to facilitate program comparison.

The utilities should also prepare and append a table showing the following:

1. Programs grouped together, with their individual NTGRs, by the type of program, e.g., management services, rebate programs, SPC programs; and

2. A table that coordinates the programs in Table 4 with the elements listed in Table 2.

For any changed or supplemental NTGRs the utilities propose to use for calculating cost-effectiveness of PY 2001 programs, the utilities should serve on the service list a document outlining the changes, together with supporting documentation, no later than November 8, 2000.

⁴ The CEC also questions why the Express Efficiency element is only listed in the renovation and remodeling market, which is one of six non residential market areas. This issue discussed infra, with respect to NTGRs for statewide programs.